An outdated logo, a few photos of a seminar in Luxembourg on the company’s LinkedIn page and an address in Brussels, where the building doesn’t show anything. This is almost all the information that can be found online on Eurelec Trading, the purchasing center established in 2016, in the Belgian capital, by Leclerc and the German supermarket chain Rewe.
Unknown to the general public until now, it finds itself under fire from criticism – just like its Spanish counterparts Eureca (Carrefour) and Dutch Everest (Système U) – thanks to the agricultural crisis. These organizations, which negotiate the prices of the same food and non-food products for several distributors, are accused of circumventing French regulations and more particularly the Egalim Law supposed to protect farmers’ income. Above all, they illustrate the incapacity of the French State to enforce standards considered too complex and not restrictive enough.
A primarily commercial interest
Initially, the purchasing centers were created with a very specific goal: to reverse the balance of power against the French and international agri-food giants in commercial negotiations. “Take the Nestlé group, whose turnover is around 100 billion euros. Even if Leclerc is the leading French distributor, what weight does it have compared to this Swiss multinational? Not much. Obviously he finds interesting to join forces with other distributors”, points out Olivier Mevel, lecturer in management sciences at the University of Western Brittany.
French distributors are forming these alliances with foreign brands to better drive prices down. An even more essential selling point in times of inflation. “Système U is the fourth player in France with nearly 12% market share, while Leclerc is around 24%. Price is the first choice criterion for consumers. If we want to continue to be attractive to our customers, it you have to go through these purchasing centers”, explains Thierry Desouches, the spokesperson for Système U, who ensures that he does not circumvent French law and respects the principle of non-negotiability of agricultural raw materials enshrined in Egalim 2.
Few of the sanctions pronounced
But generally speaking, the field reports suggest the opposite. “We have received feedback according to which distributors who rely on purchasing centers would say in negotiations with manufacturers: ‘Don’t talk to us about the Egalim law, we don’t apply it’. The few sanctions imposed have not changed the attitude of distributors. They have more interest in circumventing the regulations”, affirms Senator Anne-Catherine Loisier (Centrist Union), who was co-rapporteur of the bill aimed at advancing negotiations commercial.
Already in 2018, the Directorate General for Competition, Consumer Affairs and Fraud Control (DGCCRF) expressed its concerns about the “new practice of outsourcing commercial negotiations”. “It seems that at Leclerc, we are very discreet on the subject,” reports a distributor. It must be said that in 2019, ministers Bruno Le Maire and Agnès Pannier-Runacher announced that they would take the leader of the sector to court for abusive commercial practices, demanding 117.3 million euros from him, before the DGCCRF imposed a fine on him. fine of 6.34 million euros. In 2022, the Court of Justice of the European Union ended up agreeing with Leclerc by legitimizing purchasing centers.
The anger of the farmers today sheds light on this montage. “These practices are just scandalous. We are happy that the subject is finally being taken very seriously,” confides a large foreign industrialist. For Frank Rosenthal, consultant specializing in mass distribution, purchasing centers are “purely and simply commerce. They were set up so that distributors could defend themselves against players who are multinationals such as Coca-Cola and so on. improve purchasing conditions. It’s the same logic everywhere.” According to him, “when we talk about this subject, we divert the problem. It is not because of these European purchasing centers that the remuneration of farmers is so low. It is the scapegoat theory and, as often, moralization by politics.
A law with too many details, difficult to fully apply
Behind this system of circumvention, proven or not, it is nevertheless the responsibility of the State and the fair application of the Egalim laws which are called into question. Bercy recently recognized that DGCCRF inspections “revealed a certain number of infringements on the part of manufacturers (…) as well as on the part of distributors”. In reality, the evil is deeper. “The making of the law is quite sick in France. As we are failing in its supervision, we tend to put too many details in the law itself. Egalim should be rewritten while sticking to the main principles of law and by characterizing the abuses more precisely so that they are better punished”, estimates Frédéric Descrozaille. The Renaissance MP gave his name to the law – also called Egalim 3 – which will come into force on March 1, 2024, article 1 of which provides that distributors must comply with French law, including when negotiations take place in a central purchasing office abroad. In any case, the threats of administrative and financial sanctions do not seem to discourage manufacturers and distributors. “In the first Egalim law, the fine for non-compliance with the deadline was 375,000 euros. In the one that bears my name, we increased it to one million euros, then the Senate passed it at 5 million euros. With Eurelec, Leclerc is sticking to this rule. As this is not sanctioned, due to lack of controls, it is of no use”, regrets the elected official.
“A lot of Egalim showed good will, but it’s a bit of wishful thinking. It’s very difficult to control. There were some interesting ideas like protecting the cost of raw materials. But that’s not enough , we need more than measures”, says Marie-Laure Allain, CNRS research director at the Economic Research Center. To the point of already imagining an Egalim 4? “How far are we going to go? There will always be a crisis which will lead to a law, but will it be applied?” asks Thierry Pouch, chief economist at the French Chambers of Agriculture. However, avenues exist: “A maximum percentage of foreign products among distributors, taking into account production costs such as energy…”, lists the expert. On the first point, mass distribution could take the lead. “We have to display the origins and play the France card. Yes, I sell tomatoes that come from Morocco between October and April, because there are none produced on our territory. But after that, they disappear from our stalls. We need a little good will,” judges the boss of a major brand.
In recent weeks, an emblematic case has shaken Egalim a little more. At the start of the year, the agri-food giant Lactalis chose to apply the same purchase price for milk as in 2023 – 405 euros per thousand liters -, without taking into account the increase in production costs. “Farmers are often in an extremely unfavorable position. For the milk market, there is a single buyer who collects from the cooperatives in a region. If the latter does not sign the contract, no one buys their milk anymore. He there are a certain number of sectors where this imbalance exists,” notes Marie-Laure Allain. For their part, distributors accuse manufacturers of taking over the regulations. “We still have agri-food companies demanding price increases by justifying that the cost of raw materials has increased, when this is not the case. The principles of the Egalim law are good, but we have left too many possibilities for manufacturers to free themselves from it”, decries Jacques Creyssel, general delegate of the Federation of Commerce and Distribution. Potential breaches that the State plans to investigate, provided it has the means.
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